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LIBERALISM SINCE WWII
Class Notes
A. British Welfare State
 Sir William Beveridge: social security is
necessary but should not stifle incentive,
opportunity or responsibility
o Provide a minimum to live but leave
room for people to strive to obtain more
than the minimum
 Britain established several acts to provide
some social security (social safety nets,
social programs)
 “post war consensus”: when both the
collectivist Labour Party and the
Individualist conservative Party agreed help
was needed
 Start of the growth of modern liberalism
internationally – some social programs, to
assist people – employment insurance,
assistance to elderly , child care and health
care
B. Post War Economy – Canada
 Page 215
 Strengthened social programs
 Create of welfare state ideas:
o Universal health care
o Old age security
o Foreign investment review agency
o CRTC
 Moved towards Modern liberalism –
abandoning the more ‘free market’
ideas for some government intervention
C. Economic Crisis: 1970s
 Causes:
o 1. Withdrawal from Bretton Woods
agreement
 These countries no longer had to
use price of gold to determine
worth of currency
Student Notes

D.
World currencies freely floated
on markets – led to inflation and
slowing of economic activities
o Arab-Israeli War (4th)
 OPEC – 5 month embargo on oil
to US and Netherlands
(supporting Israel)
 reduced production –prices
skyrocketed - gas shortages
in US – consumer goods
rose – prices rose –
economic slowdown and
inflation
 led to the need to change economic
strategy
 liberal democracies faced a slowdown
in the economy (recession) and inflation
- Stagflation
 British PM Callaghan realized that they
could no longer spend their way out of
recession (Keynesian economics wasn’t
working!!)
A New Way of thinking: Monetarism
 Recession of 1970s led to a pendulum
swing back to favouring the more
classical liberal notion of laissez faire or
free market (in some countries)
 Monetarism:
o Control of countries money supply is
the best way to encourage economic
growth and limit unemployment and
inflation
o Money supply is controlled through
the regulation of interest rates
 Milton Friedman
o Inflation was caused by too much
money supply (fault of the Central
Banks over production)
o Argued that as money rises –
consumer spending rises – demand
rises – inflation rises....which leads
to a recession
o Wanted money supply to be linked
to the rate of inflation (an economic
indicator)
 Fredrich Hayek
o Critic of collectivism (and Keynes)
o Believed for collectivism to work the
government needed to control the
economy which would eventually
lead to the government controlling
social aspects of people’s lives
o Believed it was impossible for
government to have the knowledge
and ability to make all economic
decisions
 Government controlled supply
but would never have enough
knowledge of demand
 Both promoted Price System, Free
market
o Only way to balance supply and
demand and maintain individual
liberty
E. Price System/Free Market
*There are 5 key characteristics in a market
economy
1. Private ownership/freedom to buy and
sell
 Goods and services must belong to
the individual who is free to sell them
for whatever price they can convince
a buyer to pay
 The buyer is free to seek out the best
deal possible
2. Free competition
 Businesses are free to produce
whatever they want, however, many
businesses can produce the same
goods
 Competition helps keep prices low for
consumers
3. Prices are set by forces of supply and
demand
 Price is determined by how much is
available compared to how much the
consumer wants it.
4. Profit motive
 To make as much money (profit) as
possible – ultimate goal
5. Consumer Sovereignty
 The consumer decides what will be
produced with the resources
available as they will only buy what
they want
F. Monetarism vs. Keynes


Keynes – interventionalist
Monetarist – more classical liberalist
o Margaret Thatcher – Great Britain
o Ronald Reagan – USA
ECONOMIC PRINCIPLES AND THE
PRACTISE OF LIBERALISM


A.
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Class Notes
USA argued that liberal goals are achieved by
limiting government intervention and only
providing the most basic social programs
o Drive for wealth arises from self interest
and need to complete (individualism,
classical liberalism notions)
Canada, Sweden favour more government
intervention
o Argue that inequality undermines
liberalism as citizens fall victim to business
cycle and struggle (modern liberalism –
social safety nets)
o Still encourage private property and
initiative but also believe in government
intervention and taxation as essential
elements of society
o The level of involvement depends on the
status of the economy
Sweden:
**Social Safety Nets: generous welfare
system, unemployment, maternity etc
payments are extremely high in order to
maintain standard of living of people
o Cradle to Grave (or “womb to tomb”)
Caused extremely high taxes to the
people. Estimated that in the 1960s, 70% of
the population depended on the government
for its livelihood
Reform was needed
o
1992 – Tax rates: 50% of income,
Canada: 36.5%, USA: 29.4%
o
1993 commission made necessary
changes
- examples: unemployment insurance
in the former system provided 90% of
person’s previous income, after
reforms only 80% of income
- Example: sick or injuring – received
Student Notes
90-100% of salary. After the reforms
worker had to wait 2 weeks and
receive only 80% of salary
B. Canada
 Individualism (can have private ownership,
individual rights) and collectivism (still look out
for needs of society - social assistance
programs, gov’t ownership
 Federal Level – (1990s)Canada has
implemented some Keynesian Economics put billions into building and repairing
infrastructure
o Today: Harper – stimulus package to
help failing economy
 Provincially (Alberta)– gone more
towards supply side - Ralph Klein
 cut spending to reduce the deficit
(education, health care)
 de-regulated to help improve
business (less rules)
 privatization (AGT)
SUPPLY SIDE ECONOMICS:
Basic
Information
(pg. 198 –
212)
Stagflation
(pg. 216)
Inflation (pg.
218 - 219)
Monetarism v.
Keynesian
Economics
(pg. 219)
Reaganomics
(pg. 220)
Thatcherism
(pg. 221)
Blair’s Third
Way (pg. 222)